Question: The Supreme Lord is quoted as paraṁ satyam (the Supreme Truth). But then we see Krsna saying to Mother Yashoda that He has not eaten the clay. Is He saying a lie or is it the truth?
He is saying a lie. Krsna can lie, that we all know.
Question: But then how is Krsna called paraṁ satyam?
Yes, He is the Supreme Truth and the Supreme Truth can also lie. But the lying is only for enjoyment. So it is not that it means that the Supreme Truth is not the Supreme Truth. Krsna is still the Su